Strange things I consider on a regular basis

[Michigan CG]

Tim,

No sir, it's not, it's cancerous, it's just not public knowledge yet. We're dying, and the speed at which we're visibly showing signs of sickness are accelerating.

Also, I don't have to imagine, I'm in several states, thus considerably more involved than most.

Dave...

Dave, when you consider Chicago, as compared to the rest of the major metropolitan areas you are doing well there (as opposed to other metro areas). Last I read you have a 1-2% decline in value. I am now in an area where some properties are seeing 30% declines, and other areas are now at 40-50% declines.

I have not had a SFR call for so much as a comp check in three weeks.

Most of the market will recover to stable in the summer of 2009, some of us will not see it until 2010-2012.

 

[Lloyd Bonafide]

There are a lot of areas where REOs and short sales / distress sales are 70/80/90%+ of the market, and it does get very ugly very fast.

As fast as prices were going up several years ago, (20 to 30% annual appreciation for several years running,), prices are going down that fast in some areas now.

I have seen some properties that have lost 50 to 60% of their value over the past two years, but they will bottom out as investors start buying.

 

[Thomas N. Morgan]

One of our local banks now owns 106 parcels of real property in this County. Some of them are their own offices - let's 6. That leaves 100 for REO's.

Wachovia Bank owns 41 parcels of real property in Marion County. Has maybe two branch offices here.

Adept, you may be on to something.

 

[KMA77208]

I assume none of the respondants have done an appraisal in San Diego, San Bernardino or Riverside. If I don't have REO or SS's as my comps the appraisal will not go through(as they are the market value in these areas. San Diego may be a tiny bit better). It is actually difficult to find a traditional sale in these areas and most of the appraisals done are purchases of REO properties or fruad re-fi's that are a joke. I walked through a townhome development a few months ago on a review. Literally every other door had a bank owned no tresspassing sign on the door.

On another note, the range that banks will let properties go for is so wide that I've noticed that REO's and somewhat SS's from more than 3 months ago still show some competativeness with current sales in some of these areas although there is no reason to use a sale more than 3 months old in any of these areas.

 

[Restrain]

Many of you are seeing what old-time Texas appraisers saw in the 80's, 90's. Yes, REOs become the market. Just the nature of things. It took Texas 5 years to work out the problems. Nationwide, it may take as long. Michigan.....I don't see an end.

 

[JonGalt]

Dave, when you consider Chicago, as compared to the rest of the major metropolitan areas you are doing well there (as opposed to other metro areas). Last I read you have a 1-2% decline in value.

Don't believe everything you read. Except for a few neighborhoodsit is much worse, some southside neighborhoods have fallen off the cliff. I believe this could be only the beginning of the downward spiral and expect no end to the decline in the near future, I hope I'm wrong.

 

[xmtpedprl]

Oh Tim, it's so nasty here it;'s not even funny. I don't know what you're reading, but we're in DEEP doo doo out my way.

To make the situation even worse, SB1167 soon goes into effect, and wow, won't Cook County really be smoking then!

NOT.

Dave...

 

[Hamlet]

Dave........(perfect!):

I had an unbeknownst stash once. It was hidden in a little heart-shaped box on my coffee table. I had forgotten about it from months before when I had cleaned up my act and got better friends. I foresaw much relief as I cleaned up prior to a visit from Mom. :new_llying:

Was that after the smoke cleared?

 

[Mike Boyd]

I think there is, or should be, a 4th option.

Most families live on the edge. If they get one house payment behind, they cannot catch up without some kind of windfall. Lenders will not stop the foreclosure process until that payment is caught up. So, the property owner just stops making ANY payments.

It would seem to me that a 4th option might be for the bank to allow the missed payments to be tacked on to the end of the loan. So, instead of a 360 month amortized loan you get 362 months, or however many months the property owner is behind. Other loan terms would also have to be revised such as: convert the adjustable rate to a fixed rate, fully amortized at TODAYS interest rate...no penalty for falling behind and the resulting lower FICO rates. If the owner is penalized it just makes it harder for them to stay current and it prohibit them from refinancing in the near future. There would be no stigma of foreclosure.

Of course, this is an over-simplification and would not work with all property owners.

Meanwhile, the foreclosure problem continues with all others. It will take time to work out but if you even slow down the foreclosure rate a little, it will not take as long for the market to stabilize. Some predict that it will be in the final quarter of 2009 before that happens. It will likely be longer than that in some market areas and maybe less than that for other markets. We've gone through this before. In the mid 1960s, there were tract after tract of unfinished homes taken over by the construction lenders and the foreclosure rate climbed to unprecidented figures. It took 2-3 years to work itself out. It happened again in the late 70s then again in the early 80s, and again in the late 80s and early 90s. Each time it took 2 to 3 years for the market to stabilize. This time, I predict 4 to 5 years. Boom and then bust. This time, I think it is much more dangerous because so many sub-prime loans were written and so many more loans are in trouble.

 

[Abzntminded]

Recently (Feb) we re-rented a SFR in an older built-out suburb. We had first rented it about a year ago. Each time there were about 40 applicants to rent, but this time more than 10% were families who had re-fi'ed themselves out of their home - that is, they had used the home as an ATM until they hit the ARM jackpot. (One applicant was a cop who had bought his home 15 years ago - he offered us a bribe to rent to him - ironic.)

The point is that these people had good jobs, kids in area schools, well-established, good credit until the foreclosure. But they're not going to starve - it's sad, but they'll be renting for a time, at least until they either build their credit back up or come up with a sizable down payment to purchase a home again.

This is different than the early 90's in SoCal, when defense contractors and others were closing their doors and the area suffered massive layoffs. It's much worse to lose a job than a house, and that hasn't happened yet.

One thing I can't quite get, though. In many cases the banks seem to be willing to sit on a foreclosed property for months and months and not try aggressively to sell it. I suppose their only certain expense is taxes, but a vacant property deteriorates pretty quickly and has to be at least an insurance liability. With reasonably strong rental demand out there, why don't these banks hire a management company to rehab and rent the property out? It seems such a waste.